tv Bloomberg Markets Bloomberg December 2, 2015 10:00am-11:31am EST
we are live from bloomberg world headquarters in new york. i'm betty liu. a lot happening with the fed. -- venture janet yellen weeks later this morning. .edge funds hunker down who will survive as the industry suffers the biggest amount of redemptions and's the great recession. talk about a twisted web. yahoo!'s board reportedly meeting to sell the company's core internet businesses. what could that mean for marissa mayer? we are about a half hour into the training -- the trading session. i want to head to the markets ask where julie hyman can give us more direction. julie: a janet yellen waiting
game. she is scheduled to speak at the economic club of washington so it looks like markets are waiting for her comments to perhaps get more direction. we have had some commentary from other officials over the past 24 hours. ar. heard from leo brain we heard from dennis lockhart, he says he does favor raising interest rates is month. in addition to hearing from those officials, we also heard from adp. it's payrolls report saying the u.s. economy added 217 -- 217,000 private jobs. this was precursor of the jobs report on friday. thoughts for investors to consider. p -- wirp. at w.a.r. the likelihood the futures market is pricing in another
increase. we have seen an increase in the probability. it stands at about 74%. that is something to consider as we going to these remarks from janet yellen. that's take a look at the treasury market ahead of her comments. we are seeing an increase in yields. 2.18% help in part by jobs figures. a bump in the u.s. dollar versus the euro. the ecb, we will hear from them tomorrow. the euro is falling versus the u.s. dollar. . the expectation that there may be more easing in europe. betty: or likely will be. big stock movers. julie: we have to start with yahoo! and the story out of the wall street journal that got was considering selling its core business leaving it with essentially its investments in ali baba. those yahoo! shares are rising 6%. we will talk more about that throughout the day. the big
mover which happens to be technology is qualcomm. up 7% after the company said it agreement.tent a royalty bearing patent license to develop manufacture and sell 3g and 4g devices. walk-on had issues with negotiating license fees in china so this appears to be reassuring investors. betty: julie hyman at the markets desk. this morning, vonnie quinn has more from our news desk. vonnie: nato will bolster turkey bus air defenses of the alliance says it is not reacting to russia. turkey's shot down a russian war airplane. russia responded by bombing rebel held areas along the turkish order with syria. nato will send british planes to a base in turkey. john kerry is taking part in today's nato meeting in
brussels. >> every alliance member expressed clear backing for the efforts of the international serious support group. -- syria support group in order to negotiate -- facilitate syrian led political transition in keeping with the geneva communiques. vonnie: a plan to commit 1200 troops to noncombat roles. nato's plan to add a member is angering russia. metilingual -- john kerry the deputy prime minister. russia sees nato expansion as a threat. president putin spokesman says retaliation will be considered. escrowht house is bulk white house is bulking up the price for shutting guantanamo bay. the plan to build a replacement in the u.s..
107 prisoners are still being held. flooding is stranding tens of thousands of people in a southern indian city. the airport is closed. monsoon rain in the region are the heaviest in decades. you can get more on these and other breaking stories 24 hours a day at the bloomberg.com. betty: this year, wall street maintains its grip on bank bonuses must some of europe's biggest banks shrink their businesses. citigroup is said to join the ranks of jpmorgan with plans to keep bonuses unchanged for 2014, a big feet for any bank on wall street these days. for a closer look i want to dickens campbell. revenues and a,
division that houses trading and investment banking is up on the year to 2.5%. that is -- that has allowed them to keep bonuses flat. they could pay people more but in this environment they don't have to. betty: flat is the new up on wall street. dakin: that was a great quote. betty: it is -- it does give you a round of applause. he did not see bonuses cut. does that put pressure on the other wall street firms? dakin: it does. other jpmorgan wanted us to write this story or not, there is some game theory to it. if you are the first bank out and you can say bonuses are flat and everybody else has to match that. it leaves room for bank of america to say bonuses are up
and then they let the hero but they also can't say, we will/bonuses 5%. jpmorgan and city being the first out of the gate, they get to set the tone and say it's going to be a flat year for everybody. betty: all of this could change with trading in december. dakin: that's right. last year, citi also said there bonuses would be flat about this time. they had a terrible december and in january they said, we will cut bonuses. there is some flexibility built in. now, discussions over the next coming weeks, trading desks can fight for more money. this begins the negotiation over who gets the money. betty: how does this all happen over the next few weeks? for those of us that don't have that inside peek on what happens in these firms, how do these bonuses get to strip you --
bonuses get distributed? dakin: this week at citigroup, senior managers were told what the total bonus pool is going to be so they take that and say, i have five trading desks or 10 trading desks underneath me. it is up to me to distribute the money as i see fit. as they do that, they will tell .heir managers, junior managers it begins talks. people can say on the rates year, wee had a good should get more money. we these are preliminary numbers. betty: like another hamburg aims -- let another hunger games. the stakes are real. citigroupbell on keeping their bonuses unchanged. we turn to other industry losses . hedge funds not getting a bonus at all after the worst third quarter inflow since 2009, the
industry is bracing for more with tro. founder and ceo of controversy investments sees other herders ---- other hurdles. gomuch much cheaper to passive, cheap with a strong fundamental research on asset allocation. betty: here with me now is hedge fund reporter simone foxman. they have not seen the returns so they are voting with their feet right now. simone: i think that is the case in some of the situations. not one year of underperformance, several years. they are asking, why are we paying these fees when we could be in a cheaper vehicle. betty: they could be passively
invested. pressure on -- these hedge funds to lower their fees? are any of them doing that sort of thing? simone: when you're are not making the numbers there is pressure and the largest investors, the big pensions, are coming in and saying if i don't get this cheaper fee, i'm not going to invest with you. i think if you are not an established manager i don't know that -- there is more pressure but if you are an established manager i don't know fees have changed if you are bringing in results. that is not the news today. i think the news today is that established managers are seeing outflows because they have not been performing. a lot of big guys that made a lot of money in the financial crisis. you're talking blue crests of the world. a ton of money a couple years ago and now suddenly it has been a long time --
betty: where is all this money going? simone: it's unclear whether they are actually leaving the industry. it looks like they are moving around to different funds that are performing. one big winner has been millennium. they have seen inflows of $4.1 billion. betty: what have they done? simone: i think they are over 10%. betty: do we know why? simone: different teams. multi-strategy across different people doing well. they seem to be choosing the right people or letting go of the wrong -- the right people to let go of. betty: we tend to forget there are some winners. think to the extent that people are not leaving the industry in might be because -- how much higher can stocks go? our bonds really going higher?
if you want something else you're looking at alternatives, real estate or private equities. hedge funds are in that conversation. you should be able to make money on the short side if that is where you are thinking the market is headed. betty: that is why you are getting paid the big bucks. simone foxman, air hedge fund manager. much more ahead. yahoo! stock up over 5%. possibility of a sale of its third-quarter business. not just that mean for the future of the company but the future of the ceo? ♪
desk where julie hyman is trucking along on some company movers. julie: the trucking stocks are not trucking along in the same fashion after they got downgraded with ankle america. downgraded joy global. looking at more equipment makers today. the bank of america analyst saying a floor for demand failed to materialize. more downside is possible. weak consumer demand, rising driver costs and apparently deceleration of rate increases according to bank of america. these are the stocks that were downgraded to underperform. ch robinson is one of the worst performers in the s&p. bloomberg intelligence got data from truckstop.com and if you take a look and looks at what truckers and expect in terms of pricing. about a third of truckers expect a demand fall in pricing over the next period.
flat pricing expected by nearly half. about of the fifth expect an increase in pricing so that reflect this outlook for truckers. one of the worst performers is candor morgan. kiukindermorgan -- morgan. investing 130 $6 million in natural gas pipeline company of america. though shares down 6%. columbia pipeline group is doing a secondary offering. 71.5 million shares at 1750 per share. -- 17.50 per share. betty: thank you so much. julie hyman with some of the big movers. another big mover is yahoo!. shares of over 5%. according to a report out last
night, yahoo! has a meeting this week to way off base -- to way a selloff of core business. giles, what is going on here? : it makes sense that they would consider options right now. starbird came in and said we want you to do a few things, reconsider the sale of your stake in ali baba. it?y: no tax benefits to tom: concern whether the u.s. will give its blessing to the spinoff of those assets. there is a question of what is the appeal of the remaining business if you don't have a stake in ali baba. another thing starbird wants them to think about, selloff core assets. i would like to walk through with you what those different options are. they have a lot of options but i think what will happen when the board sits down, none of them looks terribly attractive.
you could pursue any one of them. you reconsider the sale of a stake. someone else wants to come in and by the stake? it is a very expensive company. a $30 billion stake. if you decide not to sell off the state you still have access to this great -- this growing business. the stake in the world's largest internet market. i can see the appeal of yahoo! and holding onto it. how do you deal with that and how do you let shareholders benefit from that in a tax-free way? the spinoff they are considering right now is one that yahoo! still think they can do any tax efficient manner. let's back up -- betty: why not just keep it? it is a way to unlock the value of the stake.
right now it is -- betty: just sitting there bank. . tom: you do it in a way that the government does not give its blessing to. somehow you are stuck with it. betty: you're stuck with something that is still very lucrative. does that also mean it makes yahoo! now you'd too large -- now valued too large for acquisition? tom: any buyer which took a with that same issue, will the irs can the green light to selling this off? all kinds of questions about how you define it when you spin it off, what assets you put into it. if the government perceives you as doing it simple for tax benefit they will take a second look. does someone else want to come in and take the risk? you could leave the core assets. does a pe buyer come in? does a cable company?
always a possibility. you get a lot of eyeballs but it is not a growing business. , they the core business sell hundreds of millions of users of yahoo! mail, you who knows -- yahoo! news -- it is the yahoo! that a lot of people -- that introduced a lot of people to the world wide web way back when. betty: i still have a yahoo! mail account. tom: i do too. the internet has moved on. so many things that have passed yahoo! by. social for example. people access information in so many other ways through social, apps, etc.. image drives in mobile that are admirable but have not gone far enough. upe could come in, read it at some point restructure, milk
it for cash, find a buyer down the road. it is a possibility. one other possibility is marissa goes but who is going to replace her? betty: she has stabilized the company for the time being. thank you so much. tom giles, executive editor for global tech. betty: in the next hour we sit down with scott galloway who has been a hard critic of ceo marissa mayer and what he thinks about a breakup or sale of yahoo!. ♪
the real. one ceo says he sees opportunities in his home country. marcelo castel. much for joining us this morning. be liking at the very least the weaker currency for your exports. marcelo: thanks for this opportunity. tailwindorter, we got in favor of our revenue and the results of the company. the currency right now is helping us a lot. betty: it is coming at an expense to your country, to your economy and society where you have goldman sachs saying you are in an all out depression. to you agree with that? marcelo: we are facing a severe
economic problem. the gdp this year is showing -3.5%. 2016 will be a tough year. we believe in the country and long-term and being an exporter we are investing more in our expansion project capacity in brazil. is not affected by the situation. betty: what about political turmoil and runaway inflation? marcelo: those are the perfect storm. the political situation we are living right now and also with the stagnation of economy and inflation coming back, double digits, this will affect us in terms of cost. as we operate in brazil we are not happy with that situation but on the business plan, the business perspective, we are safe. betty: a lot of people talk
about domer rosoff and with -- ef, do you think she should go? marcelo: i think brazil ms. to take measures to deal with this economic crisis. i'm not saying one party or another party. we need a consensus among the executives to find a solution. that is what brazil needs. betty: thank you for joining us. from the new york stock exchange, marcelo castelli. we are awaiting oil inventory numbers out in a few moments. ♪ sure, tv has evolved over the years.
i want to get to julie hyman anh another headline from energy service. saying the majority of numbers have agreed on a number on the crude production with the exception of saudi arabia and other gulf countries. this is the director general of tech and the iranian ministry of petroleum. we will figure out -- i'm looking for the oil numbers. i'm not seeing them come out. betty: i'm saying one. there is a headline that crude inventory is up 1.8 million barrels, versus an unexpected decline in inventory. it is not necessarily good news. gasoline up 135,000 barrels with
an infant tory of 0.5 million barrels. -- inventory of 0.5 million barrels. oil isrease in crude versus the drawdown that was expect it. you see behind me the reaction we are expecting. it looks like we are taking a leg lower, which is what you expect. we have learned that there tends to sometimes be a delayed reaction. we will see how it plays out in the market. story, we are building our inventory. thank you, julie hyman with the oil numbers. more from our news desk. vonnie? donald trump still leads the republican candidates, but dr. carson is fading as marco rubio surges.
withnew poll, trump leads 27%, marco rubio, 17%. ago, trump and carson were virtually tired. ted cruz, his party has an abysmal record when selecting supreme court justices. an interview, they are saying that they are seeking eventual judges decide with liberals on issues. that is a you may to change if selected president. an administration official is dead. national security adviser in bill clinton's second term. guilty of illegally taking documents from a 9/11 hearing. the chicagoof
police department demands an investigation after the shooting of a black teenager last year. activists say that city and police officials stalled the investigation. a jury in the first trial stemming from the death of freddie gray. a jury will be seated in the case of william porter, one of six officers that will be tried. inddie gray died in custody the spring, causing days of rioting. , and moret more breaking stories, 24-hours a day at the new bloomberg.com. seven months after raising 30 million dollars from investors, policy cycle is making another run raising $75 million by selling to a private firm focused on consumer businesses. this comes as a hot debate is going on in silicon valley to
whether companies are achieving bubble-like valuations in the private market, only to hit reality in the public sphere. i'm thinking about square, maybe. private,c versus joining me is the founder and ceo of cycle. it to raise money this time around? >> it was hard for peloton, which is an atypical business. typical, vertically integrated business, that a lot of investors were not able to get their head around. for palatine, we are a global consumer products company, i a
tesla or an apple. core business is selling high-end bikes to consumers front under $200,000 where they can take a cycle class from the convenience of their own home. your headphones on and immerse yourself in the screen on the high-end bike. get one of these 45 minute, jumping wet workouts, without leaving your home. they: as you are raising money, were you getting more questions about valuation? what is the value of the company? it,: we are not disclosing but it is not bubble-like from my perspective. betty: did you hear harder questions from investments this time around? the difficulty with the early companies for us, a medium stage company, is to understand the value. for us, we are now profitable. million dollars in
revenue our second year. we're profitable in our second year of operations. as mrs. that are fundamentally strong, you get them -- businesses that are fundamentally strong, you get them in evaluations. when you do not have foundational things that the public market likes to see, it is more tricky, you have to do one of the -- what it can become. hey,: the potential versus it is making money. unicorns cannot be unicorns anymore if they are all over the place, right? thing interesting was that this morning, the salesforce ceo, i want you to hear what he said. necessarily that these are not worth this much money, we don't actually know. they have manipulated the
private markets to achieve the valuations. i don't think a day goes by that i don't get a call of a company raising money at a billion dollars or more. john: i think he is right. betty: is there manipulation in the private market? john: i do not think it is manipulation. i think special, young companies get premium because there isn't that many. when you are in a category like uber where winner takes all, the four running companies in the disruptive category they are disrupting, airbnb for instance, it is a massive category. they are getting a category multiple as a lead player in something that could the winner take all. it is not business, it is about winning the category. they: are you seeing the fidelity's of the world asking
for protection against a down round? john: i don't know the details of those rounds. coming out of the last couple of months and seeing the mark -to-mark on the down sheets, there will be a whole new way of looking at these. traditionally it has been private investors and private companies gon public. when mutual funds are involved and they have to disclose publicly, it will be a new way of evaluating them with more exposure and control. that is what we have seen in the last couple of weeks. betty: the must be an exit strategy for you. what is the exit strategy? are nowcause we profitable with $75 million on or balance sheet. actually, more than that, we feel strongly about our ability thee aggressive in
international expansion, commercial markets, and other products. a stationary bike company. we plan to be disruptive in fitness and content. use the other companies doing disruption and software and fitness. doing greatit stuff at the nexus of hardware. betty: are you going public are not -- or not? i would be disappointed if we were not public in three years, between you and i. these style businesses that are global consumer products that , or cool,m prices fun, disruptive things like in thateloton is category. our consumers love the product. around 100,000 riders
the world already. it can be a great marketing vehicle, going profit, as you have seen with soul cycle. disclosure, after the ipo announcement, i had to try it. why. that is exactly ipos, bringing up gopro, it is now trading lower. etsy, they are trading lower than their ipo price. you have to consider that, as well, right? john: it all comes down to a good business model, disciplined operators, and selling the right story to the street. we are profitable already. we are disciplined. we acquire customers at a price below the lifetime value, so
there is margin in the business model and we operate pretty disciplined. i think the street will award that. i understand if the market gets too excited, to some extent you cannot control that as a ceo, investors, and that is a double-edged sword. betty: thank you, and congrats on your latest fundraiser. we will have more ahead in just a moment. ♪
the day for the ecb meeting is coming closer. mark: the bit of data today that was really interesting was the euro-area confliction data. for the month of november. economists were looking for .2%. the view the ecb will have to do something tomorrow. mario draghi only said a few weeks ago he will do what he must to inflate inflation which is below the goal of 2%. of 2017, it has been nowhere near that target. this is one spot that is standing out. also, the world's big steel center, the company will be even lower next year after a collapse
in prices of steel. there is no recommendation from .eutral to buy they are saying they jumped the gun and upgrading the shares in october. it has been downgraded in december. the not want to bang drum's. it is all about the ecb, and we are so nearly there. betty: one more day. i will see you in a little bit for the european close. is live fromttle the nasdaq where she is looking at 2 early winners. yahoo! is one of the big winners after it was reported the board is considering if the company should sell its main internet business, or whether it should go forward with the planned alibaba spend out. -- spin out. they have been under pressure
from star board values to make changes. financials, at the we are looking at the third consecutive decline in revenues. tolysts are expecting sales drop 13%, and earnings drop by 32%. that perhaps explains why the stock is down 30% year to date. going back to 2012 when marissa mayer took over, the stock is up 125%. qualcomm is another winner. qualcomm and xiaomi entered a patent agreement. it is a break for the company. it has been bad news has investors -- as investors worried about loyalties in china. only time will tell if this piece of news will be enough to turn that tide. betty: thank you. abigail doolittle at the nasdaq. u.s. equity stocks heading for a
new record high, again. may be today. the dow jones industrial average and s&p are out there last record closes in may. now that the average is within striking distance of those prior records, what factors could make or break the markets. is the stoxx reporter. if you were a betting man, would you say that we would make our records? .liver: it is very possible the 2100 has been tough for us to break through meaningfully. it at these levels, and you keep going up, and people start to draw lines, if you are technical guy, you can draw lines wherever you want. there are some potential catalysts this week. that is what makes this last leg
of the year interesting, and different from previous end of quarters. have janet yellen speaking today on ecb thursday, and for the rest of the month you have a debt ceiling issue that is a long shot. betty: isn't anyone talking about that? ofver: i feel like it is one those things. the republicans have held it ande as a responsibility -- is a possibility. you could see volatility and spikes on the vix when the language came out, but now we are used to it being used as a bargaining chip, and we aren't expecting anything to come of it. going to do something drastic in this new role, i don't know, that is not my realm . this week, we have the ecb. we have a high call that mario draghi has said. he has done well in delivering
what he said he would deliver. betty: even over delivering. ander: stimulus from europe easing in europe, does not come --h the caveat that further in the u.s.. if the fed to get dovish about something, they will have questions about the economy. that does not have anything to do, it is not a referendum on the u.s. economy. if they put more money, it is good for risk, people will move into equities. they like u.s. equities. because the bar has been set so high, for some reason, the expectations are missed in terms of it not being exactly what folks want, that could be a negative. about tonet yellen is speak in two hours. is there anything she could say that could throw the markets off.
issue likely to say anything that will throw the markets off? oliver: she always has her remarks that she will go with, but she has freeform where she will talk about what will happen in december, or in the next year. that is something she could discuss. she is typically not the one to release details on what is going to happen. she is talking about the data over the course of the next year. that could be good. we could see the normalization and rate hikes over the course of the next 12 months or so. that will be positive for equities. he is not a betting man, a reporting man. make bigare trying to oil like big tobacco. the battle over the environment. ♪
betty: welcome back. i am betty liu. divestments in the fuel industry have topped $3.4 billion according to climate activists. pariss are meeting in to marginalize fossil fuels, without challenge -- with a challenge to reputations like companies like mobile. environmental experts would say they have gotten people to vote. have they been successful so far? >> they announce a new number of $3.4 trillion, that is how much is controlled by these portfolios. is important to remember that this is not only about financial capital.
what they're going after is political capital. how much moneyay is really being pulled out, and how much of that will affect the oil industry. betty: the oil lobby is hugely influential. alex: absolutely. exxon is one of the biggest companies in the world with a lot of political clout. with the advocates are after, it is to undercut these companies politically. that is the way that they see to getting the policies and that theys passed want to see to bring these companies to an end in the long run. betty: the public relations, let's bring up that illustration l, who represents big tobacco. now he has a cigarette pack of exxon. he is back. have they been able to sway the major way against
companies like exxon? betty: if you look -- alex: if you look at the polls on climate in general, there is a general belief there is a problem in the government should get involved. on the other hand, the ability of the oil and gas industry is , that mostly tracks with gas prices. in the arena of policy, the wind seems to be at the back of those who want to crack down on the oil industries and go more toward solar and wind. the keystone rejection. what do the axons of the world say about climate change and greenhouse gas emissions? has changed.sage going back 10 years or 20 years there was more talk about the uncertainty in the science. bp's oryou go on
shell's website, you will see them saying that yes, i'm it changes happening and fossil fuel emissions contribute. they say they want to be part of the solution. that they will still need fossil fuels for decades. they support policies like willn taxes, they think it help them plan for their future. betty: thank you. oil andg news on big big tobacco. as we go to break, a reminder that we will have live coverage of janet yellen's address to the economic club in washington. then we will cover the ecb news conference. ♪
bloomberg markets." we are live from bloomberg world headquarters in new york. good morning. i am betty liu. she's ready for liftoff. fed chair janet yellen might talk about what happens after the first interest rate hike in nine years. closing in on a record. the s&p is not far from being in uncharted territory. its stands in each way -- way? and, what ever happened to yahoo!'s turnaround? what it means for the company, employees, and ceo marissa mayer. we are 90 minutes into the training session. julie hyman has the latest on the markets. we are just drifting here. julie: waiting for yellen. betty: waiting for janet yellen. julie: looking at the average is, -- averages, things are a
little more negative than stocks looked earlier as investors await the speech from janet yellen. i know that he will delve more into that in a few moments. if you look at the s&p, what has already done in this early session, we have seen a lot of bouncing around, albeit in an euro range, but definitely not -- in a narrow range, but definitely not decisive. if you look at the bloomberg terminal, only two groups are on the green, technology and health care. energy shares, utility shares are doing the worst by a longshot, both of them down. betty: we have inventory numbers, oil numbers up? julie: crude oil in particular. energy stocks, when you look at oil prices today, we had a pullback. and officials are meeting, despite a report we mentioned the there was some agreement on
production cuts, the agreement did not include saudi arabia, so it essentially might as will not be an agreement. there is widespread pessimism about some sort of agreement the income -- being come to by opec ministers. large-cap oil stocks lower today. chevron lower, despite getting an upgrade is a group -- from citigroup. let's look at gold prices as well today. we are seeing them lower by about 0.8% as we await commentary from janet yellen. also being hurt as we see a rise in the u.s. dollar. we got the adp private payrolls report, showing an increase of 217,000 last month, the precursor for friday's job report. the dollar index moving to the highest since about april of 2003, at least touching that level. betty: julie, thank you so much.
let's check in on the bloomberg first word news this morning. courtney donohoe has more from our news desk. courtney: good morning. first up, nato. russia is not happy about nato's newest member. montenegro will become the 29th member of the alliance. secretary of state john kerry deputy prime minister during meetings today in belgium. the country was once part of yugoslavia, and has close economic ties to russia. russia sees nato expansion as a threat. british prime minister david cameron says the u.k. must answer the call of its allies. cameron is asking parliament to approve a new mission for british warplanes bombing islamic state in iraq. prime minister cameron: the threat is real. do we work with our allies to degrade and destroy this threat, and do we go after these terrorists in their heartland's, from where they are plotting to kill british people, or do we sit back and wait for them to attack us? courtney: a-10-hour debate is scheduled, and parliament is
expected to agree to cameron's request. former national security advisor sandy berger has died. helped -- worked in the clinton white house, and later got into trouble for mishandling classified documents. a new study says high school and college football players may risk the same brain injuries as pro football stars. they studied the brains of 66 men who played high school contact football, and a third of them had degenerative brain conditions. a third of former nfl players have the same condition. that's a look at our first word news right now. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. betty? betty: thank you so much. courtney donohoe at the news desk. investors are paying close attention to the fed today. the main event is happening in about an hour and 45 minutes.
when janet yellen speaks to the economic club of washington, we will have live coverage right here on bloomberg. other central bank officials are also weighing in on the possibility of an interest rate hike. atlanta fed president dennis lockhart says "absent information that drastically changes the economic outlook, i feel the case for liftoff is compelling." but a different take from chicago fed president charlie evans, who has been dovish. he said, "i admit to some nervousness about our upcoming decision." joining me for more insight is senior client portfolio manager at oppenheimer funds. also joining us, mike mckee. mike, when you hear charlie say he is nervous, you want to say, hundred are you, how nervous should we -- how nervous are you, how nervous should we be? mike: charlie is nervous about the effect of a decision that has probably for all intents and
purposes been made. we don't hear much from janet yellen. she doesn't speak often. the last time she talked about policy was september 24. now she has a speech today, and tomorrow before the joint economic committee of congress. clearly she has some thing to say. for forecast for the year, the fed's forecast for the year, the forward guidance has been a rate increase before the end of 2015. there's only one meeting left. the markets have price it in. she will say, stick with me, we are going there. betty: but not everyone has price it in. ira: the market is about 75% sure, so 25% not sure, that the fed is going to hike. that is in relation to do things. one, we do have a big economic number on friday, and if that is particularly bad you could see the fed pause again until 2016, but that said it would take some and really dramatic for the fed. betty: like what?
ira: a zero payroll print with following wage numbers or something, very unlikely. today's adp report shows you you will get some number close to consensus, or close enough to consensus that the fed will hike. betty: is there a sense that we december 16thcome they bungle it a little, or if it is not what investors hoped, could we see a sharp market reaction? ira: probably not. the effort is to manage communication, so you do not get sharp market reaction. we will not get an explicit promise today, because it is data-dependent, but she will harp on that it will be lower for longer. we will not move as quickly, not as far as people are anticipating. this will be a gradual, slow process that probably -- gradual, slow process. they are probably pleased with where you have seen the market .o, a flattening
ira: i think if yellen does her job well today and tomorrow, you will wind up pricing not for a 75% chance of a hike, but an 85% or 90 percent chance. because we know what's coming, there will probably be little market reaction. that being said, the statement ends up being incredibly what ms., and yellen says after, because we don't know some operational details. not only the pace of hikes, but are they going to stop reinvesting mortgages coming due? every month, they have $5 billion to $10 billion of mortgages they buy, and that could be a big deal for markets. right now, the consensus is they will keep reinvesting for a year. what if they hint they will not reinvest for a year? that market could see volatility. mike: you can ask anyone coming
on the show for the last year or so, when will the fed start raising rates? you won't have to do that now. [laughter] but you will have to ask, what will they do -- betty: is anybody doubting that the pace of rate increase will be anything but mild and gradual? ira: we have not had a fed tightening cycle in so long. the previous ones have been faster. 2004 began a regular cycle for a long time, 25 basis points at every meeting. it took people by surprise in 1994. increasenot expect the they got. people only have small historical references, and they are concerned about where the fed might go. recessions happen when the fed goes too far. ira: that's probably one of the big points. they don't have a good model for what this pace of hikes might look like. 1994, the skipped meetings, like they will now, but they skipped meetings and then went 50 the next time, or skipped meetings and went 75 the next time. it will be a much different hiking cycle than any of us have
ever seen. when you look at a lot of traders industry, a lot of them have never seen -- in the street, a lot of them have never seen a hiking cycle. betty: it makes us all feel old. ira, what is the endgame? how old will he be by the time the top -- stop hiking -- they stop hiking? ira: in 2017, they will hike seven or eight times, and that will be appeared i see a 2% terminal rate at the end, which should not derail the economy in and of itself. mike: the interesting thing at the fed meeting, if they go ahead and raise rates, that is priced into the market. but as iris suggest -- ira suggests, what are the criteria for the next move? we have gotten past unemployment. is at all inflation? what will make rates raise again? that's what people want to know. betty: isn't it true that every recession we have had has been prompted by tightening by the
fed? mike: there have been exalting us shocks -- exogenous shocks. we did see a recession started by the tech bubble popping, which you could blame on the fed not acting. monetary policy gets too tight, and you see companies pulled back on investment. ira: that's one of the real fears. how does the market and economy react to modest increases? if they go slow enough, the hope is that you will not see a significant contraction in the economy. at the same time, the question is, do they keep on hiking, even when they see a slowing economy in 2017? if they do, that's a policy mistake. mike: really interesting number today. 3.85%, the bank rate 30-year average national mortgage. they have priced in tightening, and mortgage rates are still below 4%. if they can keep that performance in the bond markets,
the fed will be really happy. the economy will not collapse on a rate increase. thanks soe mckee, much. thank you to ira jersey of oppenheimer funds. live coverage of janet yellen's address at 12:45 eastern time. and tomorrow, live coverage of the ecb and their news conference. will they or won't they lower interest rates and add more stimulus? we're so used to talking about raising. a: 30 a.m. eastern time, right here -- 8:30 a.m. eastern time, right here on bloomberg television. ♪
betty: good morning, and welcome back to "bloomberg markets." julie hyman has a check on some of the big company movers ahead of janet yellen's talk. julie: the first is a bit of a mystery, avon. stocks are -- the stock is up more than 10%. it does not seem to be concre news that prompted this, but there are apparently reports that vaguely refer -- that's what is blamed when we don't know what's going on. hasmber of times -- avon been struggling for quite some time. this isn't the first time we have had this talk. i zoomed in to show the surge we have had in shares. i keep getting this notice about data on my terminal. here is the surge on an intraday basis. of uggs.cks, the maker
the preview of fall 2016 looks pretty good. incrementally more positive, after looking at that product. ers has been experiencing some downgrades and negative commentary from analysts as a love retailers have struggled with warmer weather. uggs it iteed your is 60 degrees. delta airlines shares are doing well, up nearly 3%. the company reported november numbers for passenger revenue per available seat mile, up 1.5%. they said for december, the same measure will be at the high end of previous guidance. betty: julie hyman, at the markets desk. let's talk about another mover, yahoo!. shares are up, almost 7% higher.
according to a report out last night, yahoo!'s board is considering a selloff of their core business. joining me is a vocal critic of ceo marissa mayer. you're a serial entrepreneur, an angel investor. scott: master of none. [laughter] betty: you have been pretty critical of marissa. what will happen here? scott: i think this is peace with honor. it gives everyone an exit. it is a great idea. it should have happened a while ago. five ceo's is seven years. it is an outstanding asset, valued at less than zero. so when you break of the trading sell an asset
at less than 0 -- betty: how can it be outstanding, valued at less than zero? scott: people are confused and they think the current trading at less than 0 -- betty:stewardship will not unlok value. i think marissa mayer will be the highest-paid ceo in the history of the business. she will walk away with a third of $1 billion. she will become a poster child for corporate governance. betty: all of it undeserved? scott: i would think so. why does she deserve it? betty: i'm not saying if she deserves it or not. but in some of our reports, she helped stabilize the company in the last three years, right? you mentioned the rotation, the merry-go-round of ceo's. she has been here for the last three years, able to put some within theacve company, although clearly it is not working anymore. scott: i think you are being generous. betty: i am playing devils advocate. scott: the coal mine of yahoo! has canaries dying everywhere. her senior managers, her colleagues, or the hedge fund guy who put her in the ceo spot, they have all either sold their
shares and headed for the hills or left the company. the numbers speak for themselves. this is a digital marketing business that is up 10% to 15% a year. they are great businesses to be in, and this company is hugely underperforming. they woke up, found they were an accidental hedge fund sitting on top of an amazing investment called alibaba, so as a result you will walk away with a third of a billion dollars. betty: should they spin off the alibaba asset? scott: well, the alibaba asset is cloudy, because it could result in a doomsday scenario around taxation. selling yahoo!, this should be a company in someone else's hands. it is a great asset, third most traffic in the world. sticky user base because of e-mail, and a private equity player's dream. a company that appears undervalued. betty: what do you think of a
private equity firm, say that they come in and day buy yahoo!, what could they do that? scott: everyone is looking for content. content is the new black. everyone is trying to deliver content. everyone wants to own more of your time. i still use yahoo! finance, which is heresy in the bloomberg building. betty: what do you use it for? scott: looking of stock prices and news. i think they still do a good job. this asset -- betty: you just turned uncool to me, scott. [laughter] scott: you know the real me. i make a room more cool but leaving it. [laughter] you have this asset that is undervalued. the stock used to treat on the likelihood they would spin alibaba, and now it will trade on the likelihood they will sell yahoo! because you have to bet, every
major private equity player in the world, and head of m&a for verizon, comcast. aol.: verizon already has scott: the stock would pop 10% next monday if the board meeting is extended through the weekend. i think the stock has to go up. this is a great asset, but it is time for value to be unlocked by some videos. betty: outside -- time for value to be unlocked by somebody else. betty: outside private equity, could it be comcast, softbank? scott: news corporation, disney, telcos desperately trying to differentiate themselves, t-mobile, sprint. there is so much money on the sidelines of private equity. you could see someone try to clean it up and resell it. there's a ton of people, they can't capital out there that feel they could, with a compelling vision for what is the third most traffic in the
world. you will see yahoo! stock appreciate, because as this becomes more of a reality, and it absolutely is the right honor, theeace with stock will go up. betty: why couldn't mercer do it? what happened -- why couldn't marissa do it? what happened? scott: give her credit. she made bold moves and acquisitions that turned out to be mistakes. the team with the best players wins, and she was not able to hold onto talent. betty: scott, good to see you. thanks for stopping by. scott galloway, professor at nyu's stern school of business. we will be back. ♪
moments away from the european close. mark barton now joining us from london. we are watching janet yellen here. you are watching what? mark: i tell you what, betty. we are obviously watching yellen, too, but the big one is aghi, and ahead of dr aghi, inflation data. the goal of ecb is to raise inflation to 2% over a two-year horizon. they have not done that for three years. earlier.red the market the stoxx 600. it has led everyone to believe for sure the ecb will do something tomorrow on the stimulus front. we know that is the case, we are discussing what it is going to be. it can't be known until 12:45
mark barton joins us for the next half hour, because it is the european close. mark: european stocks are little changed. eurozone inflation data reinforces the view that more stimulus is coming from the ecb. the european close starts right now. we are going to take you from new york to london in the next half hour. mark, tell us how they are closing in europe. mark: little change, that he. -- betty. we are awaiting janet yellen's speech, and awaiting the ecb tomorrow. the macro highlight of the day was the euro area's latest inflation report.